GSBS6042 Employment Relations : Loss Making International Operations

Question :

Assessment 2 – Qantas Negotiation Case Study

a. In 2011 the Qantas group had 35,000 staff. It main unions are the Australian and International Pilots Association (AIPA) which covers Qantas group pilots, the Australian Licensed Aircraft Engineers Association (ALAEA) which represents the engineers and the Transport Workers Union (TWU) representing baggage handlers, cabin crew, security, refuelling and catering and the Australian Services Union (ASU) covering administrative workers. In the time leading up to the 2011 collective agreement negotiations, Qantas positioned itself as a premium brand carrier but was in a precarious position, especially in the international sector, where it competed against many state-owned and sponsored airlines and was losing market share and incurring financial losses. The company had ordered new Airbus A380 and Boeing 787 aircraft and there were concerns from the pilots and engineers about where the long-term maintenance and crewing of these aircraft would be performed.

b. In August 2010 the AIPA canvassed its 1,700 long haul members about the issues they would like to have included in the next collective agreement. Its members overwhelming concern was about the use of Qantas subsidiaries to employ pilots on lower rates. In particular the AIPA was critical of Qantas’ budget carrier Jetstar which employed crew on 50% lower rates for performing the same work such as flying Qantas/Jetstar code share flights to Singapore. Pilots on Qantas Jet Connect flights to New Zealand were paid 30% to 40% lower rates by virtue of the fact they were employed under New Zealand labour laws.

c. The unions’ concerns were not about wages but job security. They had been vocal in their opposition to more outsourcing and off shoring. The ALAEA’s main concerns were about job security over the heavy maintenance of the new aircraft and argued that contractors should be paid the same wages as Qantas staff for equity reasons and to limit the attractiveness of outsourcing. The TWU had similar concerns about outsourcing and the use of labour hire agencies to provide ramp and baggage handling services that was usually performed by TWU members. The TWU secretary stated:

… it is not acceptable that we would have a situation where an employer agrees with its employees that they are to be paid a certain wage, and then during the life of that agreement – where the employees are obligated not to take industrial action – the employer starts employing contractors at cheaper rates and making those employees redundant.

d. After the expiry of the previous agreement bargaining commenced in August 2010 and immediately encountered difficulties. From the outset Qantas made it clear that it would not be giving ground on the unions’ job security claims arguing that they threatened managerial prerogative. The TWU was unhappy about the negotiations and complained that Qantas would advance non-negotiable offers and placed deadlines on the acceptance of package offers. Between August 2010 and October 2011 the ALAEA met with Qantas in 47 formal bargaining sessions. Despite the frequency of meetings, the union was unhappy with the negotiation’s progress. In March 2011 the ALAEA successfully applied to the Fair Work Commission (FWC) to hold a secret ballot for industrial action. Subsequently its members voted and endorsed a number of planned actions included strikes of up to 48 hours, stop work meetings, work to rule, bans of over time, refusing to feed data into software etc. In May the ALAEA stopped work for two hours and refused to do certain duties after bargaining hit a ‘brick wall’.

In May the AIPA went to the FWC for a secret ballot on industrial action with the unions’ leaders arguing in the FWC that the

e. AIPA and Qantas have met on over 21 occasions since August 2010 to negotiate a new agreement. As you would be aware AIPA has continually conducted itself in a manner consistent with the good faith bargaining obligations as provided by section 228 by participating in meetings at reasonable times, disclosing relevant information, responding to proposals, providing feedback, giving genuine consideration to Qantas’ proposals, and including accepting some proposals. …. Despite numerous meetings including meetings with senior management of Qantas, as indicated above, there has in my opinion been very limited progress in negotiations to a new agreement. Nothing we have done has shown any meaningful sign of progressing the negotiations further and indeed, I believe that negotiations have now stalled.

f. Qantas CEO Alan Joyce branded the pilots as ‘rogues’ and accused the unions of running a ‘kamikaze’ industrial campaign and labelled their demands as completely unacceptable stating that their demands would ‘kill the jobs of their members’. He stated that “They are demanding a guarantee on job security and, in effect, a veto on change. We are a generous employer and we will continue to offer great employment conditions. We have a lower turnover rate than most Australian companies. We probably have more people with 30, 40, and even 50 year employment milestone than any company in this country” but while he understood people wanted job security “it is no more in my power to guarantee jobs in writing than to promise that Santa will swing by December 24”

g. In June Qantas reached agreement with the ASU for the 7,200 administrative staff whilst at the same time offering voluntary redundancies across its 7,000 cabin crew. In July the unions stepped up their commenced industrial action campaign. Qantas pilots on international routes began their first industrial action in 45 years with unauthorised in-flight announcements telling passengers about their concerns over job security and wearing red ties in contravention of Qantas’ uniform policy. Alan Joyce accused the three unions of ‘deliberately destabilising the company’. From July the ALAEA commenced new forms of industrial action such as notifying Qantas of proposed industrial action, and then cancelling at the last moment, causing maximum disruption to the airline but preventing their members from losing pay by actually taking industrial action. In August Qantas announced it would restructure and there would be 1000 jobs removed, reduced flights between Hong Kong and London and the establishment of a new Asian based premium airline. This prompted a hail of criticism from the unions. That same month Qantas announced it had doubled its full year profit to $250 million but warned of tough times ahead as it revamped its loss-making international operations.

h. In September the AIPA sought to have the Qantas Shorthaul Pilots Award 2000 (Transitional) varied to take in the New Zealand based Jetconnect pilots to ensure they were employed under the same pay and conditions as Australian pilots. FWA disagreed stating that the pilots lived in New Zealand, could join the New Zealand union and were subject to New Zealand labour laws. This concerned the pilots, cabin crew and maintenance engineers whose jobs were particularly susceptible to being competition from people hired off shore. The TWU adopted the same strategy as the ALAEA from late September of threatening industrial action and then withdrawing the notice at the last moment. Two of these actions affected over 12,000 passengers and 46 flights. The unions threatened more action of this type in the future which caused a loss of confidence in Qantas’ reliability and a reduction in forward bookings. Both Qantas and the unions increasingly took to the press to explain their positions. The ALAEA secretary suggested passengers intending to book over Christmas should choose another carrier. Prime Minister Gillard stated ‘Qantas and the relevant unions are saying they want to negotiate this dispute. Well I think they should get on and do it’.

CEO Joyce’s criticism of the unions was becoming more heated. He argued:

a. Not only are they seeking pay and conditions that would put us even further beyond our competitors, they want to control key elements of how we run the company … They want to be paid to do work that no longer exists due to the advent of new aircraft. They want to retain outdated work practices. They want to tell us what we can and can’t change …. In the modern world, no company can promise a job for life. The best way to deliver job security is to have a strong and viable business.

b. On 28 October the ground staff were to hold a one hour nationwide stop work meeting. On 29 October CEO Joyce announced the grounding of the Qantas fleet for safety reasons in advance of a lockout in response to the action of certain groups of employees. On 30 October Qantas grounded its fleet of Qantas, Jetstar, QantasLink and Jet Connect services grounding 108 planes at 22 domestic and international airports. There were 447 flights cancelled and 68,000 passengers affected. The move attracted condemnation from the public, government and unions. The result was 7,000 union members were locked out and would not be paid until the dispute ended. Alan Joyce said the workers would be locked out for ‘as long as it takes’ and that the unions’ industrial action was costing the company $15 million a week and the unions would ‘have to decide how badly they want to damage Qantas.’ The AIPA characterised the CEO’s action as being ‘extreme’ and him ‘wanting to destroy the airline and hold the nation to ransom’. The Transport Minister expressed his dismay stating, ‘I indicated to Mr Joyce that I was disturbed by the fact that we have had a number of discussions and at no time had he indicated this action was under consideration’.

c. CEO Joyce stated the airline would not be held to ‘impossible demands’ from the three unions and that they had no choice but to ground the airline. The unions industrial action was costing the airline $15 million a week it couldn’t afford and he viewed the lockout as a means to bring a conclusion to this. There was open hostility between the parties with claims of anti-social behaviour. When Alan Joyce publicised death threats, a number of union leaders questioned his motives suggesting it was a publicity stunt or conspiracy by Qantas. The matter was investigated by police but discontinued.

d. As a result of the employer industrial action, the Minister applied to the FWC to have the protected industrial action terminated on the grounds that it was causing significant damage to the tourism and air transport industries. Qantas CEO Alan Joyce wanted the FWC to not just suspend the industrial action but to terminate it. Once this had occurred the parties would then be required to re-engage in bargaining without industrial action and where matters are not resolved to have them arbitrated by the FWC. The FWC provided this with both Qantas and the unions forced to discontinue their industrial action and planes recommenced flying from 31 October. The FWC ordered that good faith bargaining recommence and continue for 21 days with a further 21 days if required.

e. In December 2011 the ALAEA agreed to the Qantas offer of a 3% pay increase, job security for existing engineers and improved redundancy pay but allowed A380 maintenance offshore. Qantas reported to the Australian Securities Exchange that the dispute had cost the company $194M of which $68M was due to the unions industrial action and $70M due to the two day grounding of the Qantas fleet.

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